By David Fisher

This is the second installment of a regular series on policy topics from Siemens Healthcare.

The medical device tax is a 2.3 percent federal excise tax on domestic sales of medical devices. This tax on sales (not just profits) is in addition to the existing federal corporate tax rate. Over a 10-year period, this estimated $30 billion tax requires device manufacturers to pay the Internal Revenue Service (IRS), in aggregate, an estimated average of $245 million per month. These payments create a daunting hurdle for established equipment manufacturers and startup companies alike.

Some claim that for medical device companies, the expansion of health care under the Affordable Care Act (ACA) will more than offset the burden of this device tax — that, in fact, device companies will receive a windfall thanks to the ACA. However, the 2007 implementation of a similar universal health insurance program in Massachusetts ("Romneycare") demonstrates that this idea of a "windfall" for device manufacturers is false. For example, sales of medical imaging equipment in Massachusetts have lagged behind the rest of the country since the implementation of Romneycare, according to data from the National Electrical Manufacturers Association (NEMA).

Examining the first-year impact of the medical device tax, a 2013 AdvaMed survey of its member companies found that the tax has led to employment reductions of approximately 14,000 industry workers and caused companies to forgo the hiring of 19,000 workers. The tax's total impact on industry employment has been approximately 33,000 jobs, according to the AdvaMed survey.

Claims that repealing the medical device tax would adversely affect the ACA's health insurance provisions are incorrect. The revenue from the tax did help to offset the original cost of the bill. However, since the ACA was signed into law, two things have changed. First, another provision that helped offset the law has been repealed: The Community Living Assistance Services and Supports (CLASS) Act was repealed in January 2013 after it was deemed unworkable. Second, the budgetary effects of the ACA's provisions appear to be significantly less than originally projected. In an April 2014 report, the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) estimate that the law's projected cost for the years 2015 through 2024 has been reduced by approximately $104 billion. This new data casts ACA-related taxes and costs in a new light.

Fortunately, repeal of the tax has attracted bipartisan support. In March 2013, the U.S. Senate voted overwhelmingly to repeal the tax, with 79 senators voting in favor and only 20 voting against. The House of Representatives has also voted on multiple occasions to repeal the tax.

Congress should now take the decisive step of repealing the medical device tax. Doing so will incentivize an important growth industry in the U.S. while also adding jobs to our economy, unleashing America's potential for growth.

David Fisher is vice president of health policy and strategy at Siemens Healthcare.